The present work aims at the numerical simulation of inhomogeneities/discontinuities (cracks, holes and inclusions) in functionally graded materials (FGMs) using extended finite element method (XFEM). A FGM with unidirectional gradation in material properties is modeled under plane strain condition. The domain contains a major crack either at the center or at the edge of the domain along with multiple minor discontinuities/flaws such as minor cracks and/or voids/inclusions distributed all over the domain. The effect of the variation in stress intensity factor (SIF) of the major crack due to the presence of the minor cracks and voids/inclusions is studied in detail. The simulations show that the presence of minor discontinuities significantly affects the values of SIFs.